Labor Department Undercounts Poor, Uninsured and Non-Employed

August 24, 2006

Contact: John Schmitt, 202-293-5380 x113; 202-986-9230

Dan Beeton, 202-293-5380 x 104; 202-256-6116 (cell)

Washington, D.C.: An analysis of the nation's most important labor-market survey concludes that official estimates of the number of Americans living in poverty and without health insurance may significantly underestimate the true number of poor and uninsured. According to the study, conducted by the Center for Economic and Policy Research (CEPR), the measurement problems with the Current Population Survey (CPS) have been growing, making it difficult to assess changes in economic well being over time.

“The share of Americans covered by the country's most important survey of labor-market conditions has been declining over time,” said John Schmitt, Senior Economist at CEPR and a co-author of this report. “The group that is falling out of the survey is economically marginalized, less likely to have a job, less likely to have health-insurance, and more likely to be poor.”

Among the study's main findings:

The CPS appeared to miss about 1.4 percent of the adult population, or over 2.5 million non-working adults. The size and the increase over time in the bias in the CPS are largest for black men. The CPS overstated black male employment by about 2.5 percentage points in 1986, rising to 3.0 percentage points in 2000, and reaching 3.5 percentage points in 2005.

Since the undercounting has become more severe in the CPS in recent years, estimates of employment rates from the CPS are biased and the bias is growing over time. For all adults, the CPS overstated employment by about 1.1 percentage points in 1986, growing to 1.3 - 1.4 percentage points in 2000, and about 1.7 percentage points by 2005.

In 2005, the official national estimate of poverty, which is taken from the CPS, underestimated the actual number of adults and children in poverty by about 600,000 people (about 0.2 percentage points).

The official national estimates of the population lacking health insurance coverage in 2004 underestimated the number of adults and children without health insurance by about 350,000 people (about 0.1 percentage points).

The impact on poverty estimates for blacks and Hispanics are proportionately much greater. In 2000, the CPS underreported the poverty rate for blacks by 0.5 - 0.7 percentage points and for Hispanics by about 0.4 percentage points.

The Center for Economic and Policy Research is an independent, nonpartisan think tank that was established to promote democratic debate on the most important economic and social issues that affect people's lives. CEPR's Advisory Board of Economists includes Nobel Laureate economists Robert Solow and Joseph Stiglitz; Richard Freeman, Professor of Economics at Harvard University; and Eileen Appelbaum, Professor and Director of the Center for Women and Work at Rutgers University.